Questions on Education Credits

Michael Lodge

by Michael Lodge

As in all families there is usually someone going to school or has gone to school and the topic of education credits always come up in our tax practice.  So lets go over what expenses qualify for an education credit.

Question: What expenses qualify for an education credit?

Answer:

Expenses that qualify for an education credit (whether the American Opportunity Tax Credit or the Lifetime Learning Credit) arequalified tuition and related expenses paid by the taxpayer during the taxable year. Qualified tuition and related expenses are tuition and fees required for the enrollment or attendance of the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer at an eligible educational institution for courses of instruction.

An eligible educational institution means a college, university, vocational school, or other postsecondary educational institution that is accredited and eligible to participate in the federal financial student aid programs administered by the Department of Education.

Qualified tuition and related expenses do not include the following types of expenses:

  • Expenses related to any course of instruction or education involving sports, games or hobbies, or to any noncredit course (unless the course or other education is part of the student’s degree program or, in the case of the Lifetime Learning Credit, the student takes the course to acquire or improve job skills),
  • Student activity fees (unless required for enrollment or attendance),
  • Athletic fees (unless required for enrollment or attendance),
  • Costs of room and board,
  • Insurance premiums or medical expenses (including student health fees),
  • Transportation expenses, and
  • Other personal, living, or family expenses.

The Protecting Americans from Tax Hikes Act of 2015 makes permanent the American Opportunity Tax Credit (AOTC).

For the AOTC provisions, student activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. Expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution.

For the Lifetime Learning Credit, student activity fees and expenses for course-related books, supplies and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance by an eligible student.

If you have any tax questions submit them to:  tax@icontaxgroup.com